This post is part of an ongoing series describing the MORE NYC plan to use the massive expansion of housing in NYC to address economic, social and environmental challenges.
While New York City is home to some of the wealthiest people on the planet, basic human services, transit and infrastructure remain underfunded. Part of this is the inequality in the tax code that effects states across the country, but the fact that hundreds of thousands of commuters work in the City without paying city income or sales taxes is another key reason for the ongoing budget crises faced by NYC.
A massive expansion of housing in New York City, as MORE NYC argues for, would raise money through inclusionary zoning fees imposed on market rate housing and bring in income taxes, property taxes and sales taxes from all the new residents living in the City, rather than working there but paying their taxes and spending their consumer dollars elsewhere.
To ensure that the City has the initial capital revenue to support new residential populations, the MORE NYC program assumes that something on the order of 40 percent of inclusionary zoning fees imposed on new market rate housing will go to transit, educational and medical infrastructure in the City. On top of that initial revenue from IZ fees, expanding residential construction also vastly expands the long-term revenue base of the City for all other day-to-day social needs.
The initial shorter-term fiscal boost would be the increased taxes paid by workers constructing the buildings, the induced tax revenue from their personal consumer purchases and taxes on materials in constructing the buildings. Assuming 100,000 units added to lower Manhattan over the likely decade or so of construction, this would add an estimated $10 billion of revenue to City coffers.
Once the buildings were finished, a range of City taxes would be paid both by the new residents, the workers maintaining the buildings, and by those employed to provided services and goods to those new residents. Combining both the initial market rate units and the affordable units built partly with the IZ fees, the total additional revenue to the City would likely be more than $5 billion per year--a roughly 10 percent increase in City revenue. In a sense, this revenue boost can be understood as the City recapturing a portion of the revenue currently lost to commuters working in the City but who live outside its tax jurisdiction because of the current high costs of housing. City politicians have sought legislative ways to impose (or rather reimpose) a commuter tax on such individuals, but increasing the housing supply so that people working in the City can afford to live there as well is a far more effective long-term solution to that revenue problem.
The projected revenue would be even greater if the inequities in the current City property tax system could be fixed. Currently, that property tax system is a complicated nightmare of multiple classes of property, discounted assessments, and odd ways of attributing value to buildings that has the net effect of often allowing lavish luxury dwellings in Manhattan to be assessed at rates far below the percentage rate for more modest homes.
For example, while the average Manhattan residential property pays 0.078 percent of its value each year in property taxes (an amount quite low by national standards), an investigation by the New York Times found that luxury condos on Central Park were paying property taxes at rates less than a tenth of that amount. Reforming the property tax code - which would likely require support from Albany - would add potentially billions more in annual revenue from luxury units build under this program.
Given the wide-ranging social needs facing New York City and related urban areas, expanding housing using measures like inclusionary zoning fees and property tax reform are one of the most effective paths to raising the revenue needed.
Read the whole MORE NYC plan here
Sign the petition to Mayor De Blasio in support of the plan
Past MORE NYC posts: